tv Nightly Business Report PBS June 20, 2013 4:30pm-5:01pm PDT
this is nightly business report with tyler mathisen and susie gharib brought to you by thestreet.com, interactive financial multi media tools for an ever changing financial world, our stock advisor drives during low interest rates. real money helps you think through ideas for investing and trading stocks. action alerts plus is a charitable trust portfolio that has trade by trade strategies online, mobile, social media, wearethestreet.com. a root in stocks, bonds
commodities you name it, fear of the federal reserve pulling back on the bond buying sends investors to the exits. the dow suffers the worst day of the year plunging more than 350 points. what should you do now? on the move, home sales spike to the highest rate in more than 3.5 years but one set of buyers is on the outside looking in. and face time, it's good to be the face of a brand but what happened? the company if their founders flounder, you may not like the way it looks. all this and more on nightly business report for thursday, june 20th, 2013. good evening everyone, susie gharib has the night off. remember those stock market gains up in may and until yesterday and today in june, well, they are all gone now. victims of a two-day slide that began yesterday and only got worse today. dollar, there was basically nowhere for investors to hide, not equities, not bonds, not
commodities. the main trigger was the decoration for the fed that it's ready to wind down the stimulus program. the loses were compounded in commodities by weak data on chinese manufacturering. on wall street roughly 20 stocks declined for every one that advanced. all s and p sec tomorrows down. the two-day drop the biggest since 2011 and the dow is off 5% from the all-time high set a month ago. at the close, the dow tumbled 353 ending well below 15,000 the s and p down 40. no matter where your money is there is surely less of it today then there was yesterday. virtually no asset, not stocks, not bonds, not commodities was untouched by the second-day
reaction to yesterday's fed speech. words that arguably signal good news in the long run. >> the committee believes the downsides have dim finished since the fall. >> reporter: they pulled the rip cord as chairman bernanke put cords on market boosten bond purr chases. >> it would be moderating purchases this year. >> reporter: like joe freezer way back in '73 down went stocks, bonds, oil, gold, and silver. all 30 dow stocks lost value today, so did 96% of the s&p 500. treasurys tanking. yields on the 10-year note topping since august 2011. oil down to $95.40 a barrel, lowest in months. gold off more than 6% to it's lowest level in almost three years. the drop in silver was the steepest down more than 8%,
cheaper than it's been in four years. now what? if anything, higher interest rates might be a good sign for savers but are the good times of 2013 over? or is this a chance to take advantage of lower asset prices just as the economy shifts into a higher gear? >> one point we think a lot of investors are missing, though, is that the fiscal drag to the economic growth scenario for the u.s. next year becomes far more favorable. >> let's get prospective from phil orlando. phil, as always, good to see you. question number one, is this bull market interrupted or bull market fatally wounded. >> we're just interrupted, tyler. there is no question the sell off was a reaction but the market is missing it. the federal reserve in our view is going to be making a data dependent decision.
for them to pull it that's been aggressive for a number of years, they have to believe the economy is ready to grow at 3% or better and they wouldn't pull the accommodation if they felt the economy was weak. so that's a positive, not a negative. >> basically, it seems to me, phil, that what chairman bernanke said yesterday is what he's been saying for months. he did put more sharp points on it but what occurs to me is that the sentiment in the market has changed. a month ago when it was bad news, the market played by it, played past it. today when there are signs of good news in the economy, the market doesn't take it very well. why did sentiment change so abru abruptly? >> the market since the middle of may, i guess it was may 22nd when this news first started to break, the market has been down about 6% over that period of time. so there has been sort of a shift to negative sentiment and generally around meetings you do get this volatility. in our view, this move today was
over sold. that's not to say we're absolutely at the bottom from a technical prospective you could lose another couple percent but we think this is setting up as a lo longer-term opportunity than a chance too run for the hills here. >> if you agree for your point this is a buying opportunity, if you think the economy is starting to get into a higher gear, which is certainly what chairman bernanke was suggesting there, where are the best opportunities to buy right now? >> what you want to do is focus upon what bernanke said. if the economy is improving what are the economic sensitive things to do better? diversified companies and consumer discretionary stocks like housing and auto and media. if we're right that the economy starts to pick up in the second half of this year and into next, then those stocks are cheap and ought to do well.
>> how alarmed were you by that chinese manufacturering number that came out overnight? it kneecaped the commodities space and some of the stocks, as well. is this what you would see as the beginning of a long-term slowing in emerging markets and in china? >> there is $64,000 question. we've been emerging for the last several quarters. the pmi number in china overnight was an ink mental data point that concerns investors. we would like to see the chinese government to come out with fiscal and monetary initiatives that would restimulate growth into the start of next year but at this point it's like waiting for gudel. we're watching the economy slow down in china where maybe 7.5 to 8% run rate this year. we would like to see that number stabilize there, maybe move a
little bit higher but right now the market's concern is we're looking at an emerging market hard landing and while we don't think that will happen it's difficult to change that sentiment in the data points. >> always great to see you. >> thanks, tyler. >> you bet. with everyone focussed on today's sell off it was easy to overlook. some said the manufacturering in the mid atlantic region was at a two-year high. the average is near multi year lows and economic indicators to the highest level in five years with figures for april advised upward, as well. more good news about housing in may. existing home sales shot up more than 4% from the prior month despite tight supplies reaching the highest sales pace in 3.5 years. in the meantime, prices on those homes rose 15% from a year ago to a median of $208,000.
while the housing market appears to be roaring back, there are still troubling signs. dianna joins us from washington with more. hi, dianna? >> reporter: hello. home sales are up but so are prices and mortgage rates. cash is king and unfortunately, first-time home buyers are paying the price. newlyweds john and aubry are looking to buy their first home. they planned to buy later in the year but rising mortgage rates have them rushing in now. >> right now we're kind of looking at a mortgage that could be comparable to what we spend for our apartment but we could see it go up. >> reporter: the average rate on 30-year fixed mortgage has gone up since last month when wall street worried the federal reserve would rollback the measures it had been using to fuel the economy. that means if john and aubry buy a $400,000 home their payment
goes up $143 a month. >> the bigger concern for home buyer social securis is limited is driving up the prices. >> reporter: prices are rising by double digits annually for the past six months. form early hit markets where investors raked up distressed properties. >> it can be explained by the fact it's recovering from over corrective situation but with people's income rising 1 or 2%, prices rising double digits, it can't continue. >> reporter: some are using all cash, not just investors. regular buyers are putting more skin in the game because they are in bidding wars for what few homes are for sale. >> it's the cost of doing business here in d.c. and being in the situation we were, we wanted to wait and make sure we were financially secure before
we jump into a home. >> reporter: now while listenings were up in may they are well below they were a year ago. they are moving not fast enough to meet the rise demand, tyler. >> so as he said there, with incomes growing only 1%, you can't sustain the price gain at 15%, right? >> reporter: no, he used the word unsustainable. he said prices up 15% or when you look at the distress properties and take that out of it, they are rising far too fast for homeowners to be able to move up in the market. >> diana olick in washington for us tonight. another engine of the economy, small business, a little later. we'll look at the challenges facing small business with the head of the sba and twitter co-founder jack dorsey. in congress the house unexpectly defelted a five-year
farm bill that would cut $2 billion a year from the federal food stamp program and let states institute work requirements for precrecipients. some said they didn't go deep enough while liberals said they removed too many needy americans from the program. a different story in the senate. lawmakers are close to agreeing on a compromised measure overboarder security with a final draft of a comprehensive immigration bill closer at hand. the new plan would double the size of the federal boarder patrol and add another 700 miles of fencing and pay for high tech protections along the border. it would tack on another $30 billion for the overall cost of the immigration bill. and more trouble in the motor city after tens of millions of dollars in city pension funds are gone. the state appointed manager for detroit ordered an investigation into waste, fraud and abuse and
corporation in the fund. a study found detroit's general funds could be under fund pd by at much as 40 percent and police and fire system more than 20%. a big switch from the nasdaq to nyse and that leads the market focus tonight. oracle will start a 12-billion-dollar share buy back plan but revenues missed expectations. oracle gaining 3 to 6% in the quarter. sharps had been out and they droched further on the sales short fall. oracle is up, though, 7% over the past year. dow component caterpillar reports global sales down 7% over the months because of falling demand for mining equipment and northern american
sales down 16%. cat lost more than 4.5% over the past year and down more than 1% today in the soggy market. it closed at $83.25. kroger had been on the march this year up more than 26% and it reported profits today up more than 9% on nifty sales growth. kroger says the long-term growth rate between 8 and 11% but shares got caught in the market drown draft dropping more than 6% more than the market closing at 32. $98. some of the regional bank holding companies held on to gains despite the sell off. zyons among the better performer, led the group with a gain of 2%. huntington and m and t positive on the day. and it was a rough day mostly. and as expected, facebook introduced video on it's instagram app. users can record 15-second video
clips putting facebook in direct competition with twitters' vine app as more and more people stream video to each other. facebook had gained ahead of the news and lost ground in the big sell off dropping more than 1.5% for the day. coming up, the co-founder of twitter tells us how small businesses can get an edge and yesterday men's warehouse axed the founder and face of the fran cha fran chiels for more than -- franchise for more than 50 years. first, a look at some of the biggest losers on wall street.
yesterday the founder of men's warehouse was fired after 40 years at the retailer but building a company from the ground up doesn't guarantee a founder's ceo stays in the top spot forever. marry thompson looks at the dramat dramatic down fall and surprising power of other ceos. >> reporter: it takes a certain type of person to build a business and a different different sometimes to run it. >> you will like the way you look, i guarantee it. >> reporter: george zimmer did both. >> the founder is very much at one with his company. >> reporter: the founder chairman and spokesman for the chain since 1973, zimmer ran the company for 20 years before stepping down as ceo in 2011. he was fired over an undisclosed dispute, a sup price for those who study ceos.
they say performance, not personality is usually the firing for a founder's ceo but analyst richard jaffy says performance isn't a problem. >> they are on an accelerating trend of improved performance. stock is up 30% in the last 12 months, so things aren't going badly here. >> reporter: things were going badly for groupon this year when it fired the founder andrew mason. he sites two quarters of earning misses and a stock trading lower. apple disappointing mac sales took out steve jobs returning 11 years later his reappointment as ceo in july of '97 marking one if not the greatest corporate comebacks ever. michael dale's return to the firm, less successful. leaving on his own he returned and in a fight to control and take the computer maker private. others struggle but sour like
oracle, the founder successfully steering the firm he founded in 1977. and while martha stewart is still the top chef in her company's kitchen, it's stark performance is lukewarm at best. builders all but for c erkeo founders, they might be shelved. i'm marry thompson. from the big companies to the smaller ones, this week is small business week so let's focus on what they say about the economy and challenges they face. we're joined by karen mills, the business administration and jock dorsey, twitter co-founder and ceo of square. welcome to both of you. let me begin, ms. mills, with you, what are small businesses telling you about how they view the economy today? >> this is national small business week and we have just finished crossing the country. we started in seattle at microsoft headquarters with
hundreds of small businesses. we went to dallas, to st. louis and talked about everything from technology to manufacturing and small business is really on a rising trend across the country, partly because technology is leveling the playing field and we're finding small businesses that can compete with large ones and also because there is unsuring. manufacturing is coming back and small businesses in the supply chain are benefitting. so when we look at the trend today, despite the markets today, the long-term trends for small businesses are accelerating recovery that has really been quite promising in the last year. >> we certainly do see some of that on shoring, the return of manufacturing jobs to the united states, but, ms. mills, when i speak to small business owners they are worried about two areas of uncertainty, one is taxes and the other is healthcare under the affordable karp acare act.
what do you tell them to get ready for? >> there is nothing small businesses like better than a tax credit and that's a reason we passed 16 -- actually 18 tax credits over the last several years to make sure they have more money in their pocket to invest in their businesses and in the case of affordable care act there is very interesting positive news coming because one of the things small businesses really care about is access to affordable care, and for small businesses, particularly those under 50, they will be able to go into marketplaces starting the first of next year where they will have insurance companies actually bidding on their business. you know, small businesses pay 18% more than big companies for the same healthcare just because they are small. and now with the marketplaces, they will be able to make apples to apples comparisons and get a
better deal. >> mr. dorsey, you started small businesses and some of them have become big businesses. i was speaking just yesterday with neil ferguson of harvard and he was decrying how hard he sees it today to start a small business in america. do you see it that way? is it harder than it used to be? is it too hard? >> i think it's one of the toughest things ever to get going and start, but technology is enabling people to start faster, and to start with less resources. so we see a trend in people using devices they already know how to use. their 2-year-olds know how to use. they can buy anywhere in america and participating on, so we leave this, especially at square where we enabled small businesses to accept credit kracards with the phone or ipad. >> he was pointing towards tape
or points he had to go through to get his business off the ground. let me turn the conversation, mr. dorsey, if i might, one other thing small business people tell me or ask me all the time is i want to use social media to help my business. i want to use technology to do it. i don't know how and i'm a little afraid of it. what's the best single piece of advice you can give a single business person about using social media to grow their business? >> the simple thing is talk about what you love, tweet about what you love, take pictures about your craft and business. that's what is engaging to your customers. these are tools to broadcast, to accelerate, to increase participation of people who might be able to see them. so don't be overwhelmed by the concept of technology, but just speak as you would to any customer walking into your store. >> jack dorsey -- >> and small businesses just love the fact that they can now get on twitter. they can talk right to customers and technology is really allowing them to do things they couldn't before, even using square food trucks and others
can use credit cards. so it's really opening up, the invasions that have come from companies like jack's are opening up the playing field. >> thank you for being with us and congratulations on small business week. >> thank you. all right. coming up, as people keep an eye on the first strings when it comes to charity, they open their wallet but maybe not as wide. we'll explain. how commodities, currencies and treasuries faired today. >> a federal appeals court ruled the trustee for the banks involving the madoff case cannot sue those banks to recover some
of that money. there was fears, also, from that story moving to charities despite the concerns that higher taxes and sluggish economic growth would take a big bite out of charitable give thing year, it turns out american generosity is growing. >> they dug digger despite looming tax increases and hitting an all time record of $316 billion, up 3.5% from 2011. high profile billionaires like warren buffet and bill gates grabbed the biggest headlines and mark zuckerberg is joining with nearly $500 million in givings. but by the masses helped drive a lot of the 2012 increase. gifts from individuals rose 3.9% to $228 billion. rose by 12%. the u.s. is the most charitable
country in the planet but not as we were before the crisis. on an inflation add justed basis giving in america is down 8% compared to the all-time peak in 2007. religion captures the biggest, a third with the $101 billion. education ranks second with $41 billion. education was also among the fastest growing sectors but the strongest great was in arts and cultural groups with growth up 8%, following three years of weakness. the environment and animals were also popular causes. human services and health organization were less favored and international giving was flat perhaps due to the international disasters in 2012. we'll see if the higher taxes and change in deductions will reduce america's give income 2013. i'm robert frank for nightly business report. that's it for nightly
business report tonight. i'm tyler mathisen thanks for watching. we'll see you back here tomorrow night. nightly business report has been brought to you by thestreet.com. interactive financial multi media tools for an ever changing financial world. the stock advisor guides and helps generate income during a period of low interest rates. real money helps you think through ideas for investing and trading stocks. action alerts plus is a charitable trust portfolio that provides trade by trade strategies online, mobile, social media, wearethestreet.com.